Risk Analysis of Xingtai Bank and Research on Risk Resolution Paths for Regional Banks

According to the latest disclosed data, Xingtai Bank’s core Tier 1 capital adequacy ratio has shown a continuous downward trend: it was 10.91% in 2022, dropped to 9.66% in 2023, further decreased to 9.34% in 2024, and fell to 8.66% as of the third quarter of 2025 [1][2]. Although this indicator is still above the 7.5% regulatory threshold, it has approached the lower end of the industry level, reflecting significant capital replenishment pressure faced by the bank.

In a horizontal comparison, as of the end of 2024, the overall capital adequacy ratio of national city commercial banks (CCBs) was 12.97%, and Xingtai Bank’s core Tier 1 capital adequacy ratio of 8.66% is significantly lower than the industry average by about 4.31 percentage points [3]. The continuous decline in capital adequacy rate is mainly due to the following factors: first, asset scale expansion consumes capital, Xingtai Bank’s total assets increased from 142.028 billion yuan in 2022 to 183.166 billion yuan in the third quarter of 2025, with an average annual growth rate of about 8.8% [1]; second, profit volatility affects endogenous capital replenishment, the bank’s operating income in the first three quarters of 2025 decreased by 7.09% year-on-year [2]; third, accelerated consumption of risk assets, the continuous growth of non-performing loan balances erodes capital.

Although Xingtai Bank’s non-performing loan (NPL) ratio has gradually decreased from 2.79% in 2020 to 1.96% in 2024, showing an improving trend on the surface, potential risks cannot be ignored. An NPL deviation rate of 120% means that the actual scale of NPLs of the bank may be higher than the book data, reflecting that the implementation of loan classification standards is not strict enough, and there is a tendency to downgrade the classification of overdue loans [1].

More notably, there is loan concentration risk. According to Dagong International’s 2025 rating report, the ratio of loans to the top 10 customers to net capital of Xingtai Bank was 70.92%, 70.81%, and 71.26% during 2020-2022, far exceeding the 50% regulatory ceiling [2]. As of the end of March 2025, the ratio of loans to the single largest customer was 8.02%, and the risk exposure to the largest non-interbank group customer accounted for 19.31% of the net Tier 1 capital [1]. Such a highly concentrated credit structure makes the bank’s asset quality vulnerable to fluctuations in the credit level of a single customer, significantly increasing the difficulty of risk control.

In terms of operating performance, Xingtai Bank once exhibited the characteristic of “growing revenue without growing profits”. In the first three quarters of 2025, its operating income reached 4.102 billion yuan, down 7.09% year-on-year; among which, net interest income dropped from 2.038 billion yuan in the third quarter of 2024 to 1.964 billion yuan, a decrease of 3.61% [2]. Fair value change income turned from a profit of 232 million yuan in the third quarter of 2024 to a loss of 177 million yuan, showing a trend of “switching from profit to loss” [2].

In terms of loan industry distribution, manufacturing accounts for 24.44%, wholesale and retail trade accounts for 19.71%, personal loans (excluding business loans) account for 24.70%, and real estate loans have dropped from 7.73% at the end of 2022 to 4.52% at the end of June 2025, but further adjustment is still needed [1]. The banking industry in Hebei Province is highly competitive, with 264 financial institutions, ranking first in the country; Xingtai Bank’s total assets of 183.166 billion yuan ranks 8th among 8 CCBs in the province, with relatively weak market share and competitive advantages [2].

In recent years, regulatory authorities have built a systematic policy system for risk resolution of small and medium-sized banks. In 2020, the Financial Stability and Development Committee (FSDC) of the State Council issued the “Work Plan for Deepening Reform and Replenishing Capital of Small and Medium-Sized Banks”, launching large-scale reform and reorganization work [3]. The 2025 Government Work Report further clarifies that “in accordance with market-oriented and rule-of-law principles, advance risk disposal and transformation development of local small and medium-sized financial institutions in an integrated manner, and resolve risks by category through comprehensive measures such as capital replenishment, merger and reorganization, and market exit” [4].

The policy toolkit continues to expand: first, capital replenishment mechanism, from 2020 to March 2025, the cumulative issuance of special bonds for capital replenishment of small and medium-sized banks reached 504 billion yuan [3]; second, non-performing asset disposal, Document No. 62 of the former China Banking and Insurance Regulatory Commission (CBIRC) encourages asset management companies (AMCs) to participate in the merger and reorganization of high-risk small and medium-sized financial institutions, allowing structured transactions to resolve valuation differences [3]; third, merger and reorganization policy, in the first 5 months of 2025, 184 small and medium-sized banks were approved for merger or dissolution, which is 7 times the number in the same period last year [3].

After continuous efforts, significant results have been achieved in risk resolution of small and medium-sized banks. Pan Gongsheng, Governor of the People’s Bank of China, stated that the number of high-risk small and medium-sized banks has dropped by half compared with the peak [4]. In 2024, the total disposal of non-performing assets exceeded 3 trillion yuan, and the total scale of capital and provisions for risk resistance in the industry exceeded 50 trillion yuan [5]. The overall capital adequacy ratio, non-performing loan ratio, and provision coverage ratio of city commercial banks all meet regulatory requirements; the capital adequacy ratio increased from 12.63% in 2023 to 12.97% at the end of 2024 [3].

Regional differentiation is obvious. City commercial banks in the Yangtze River Delta region maintain low non-performing loan ratios (such as Bank of Ningbo 0.76%, Bank of Hangzhou 0.76%) relying on the advantages of developed economy and industrial upgrading; city commercial banks in the central, western, and northeastern regions have higher non-performing loan ratios due to great pressure from economic structural transformation [3]. Such regional differences determine that risk resolution must adhere to the principle of “adapting to local conditions” and adopt a precise disposal mode of “one bank, one policy”.

Sufficient capital is the foundation for banks to resist risks. For regional banks like Xingtai Bank that face greater capital replenishment pressure, a multi-channel concurrent capital replenishment strategy should be adopted:

: Improve profitability and increase retained earnings. First, optimize the asset-liability structure to improve the net interest margin; the net interest margin of city commercial banks has dropped to a low level of 1.38% in 2024 [3]; second, control operating costs and improve the cost-to-income ratio; third, develop intermediate business and increase the proportion of non-interest income.

: Adopt a combination of multiple tools. Private placement is the main channel; in 2024, many city commercial banks replenished core capital through private placement to local state-owned enterprises [3]; in terms of capital replenishment bonds, city commercial banks issued 162.9 billion yuan of Tier 2 capital bonds and 99.2 billion yuan of perpetual bonds in 2024, both of which increased compared with 2023 [3]; in terms of special bond capital injection, local governments can replenish bank capital by issuing special bonds, with a cumulative issuance of 504 billion yuan from 2020 to March 2025 [3].

An NPL deviation rate of 120% reflects that asset classification is not strict enough, requiring strengthened risk identification and disposal capabilities.

include: write-off disposal, commercial banks wrote off about 300 billion yuan of non-performing loans in 2024; litigation collection, strengthen judicial collection efforts for overdue loans; asset transfer, batch transfer of non-performing assets to asset management companies.

: Draw on the spirit of Document No. 62 and adopt structured transaction models. When there is a divergence in the valuation of non-performing assets between banks and AMCs, cooperation can be reached through profit-sharing and loss-bearing methods [3]. At the same time, promote the pilot program of batch transfer of personal loan non-performing assets to expand disposal channels. China Cinda acquired nearly 60 billion yuan of principal and interest of non-performing claims from 54 local small and medium-sized banks in the first half of 2025, a year-on-year increase of 85.4% [3].

is even more critical. It is necessary to establish a full-process credit risk management mechanism covering pre-loan investigation, credit approval, and post-loan management, implement ledger-based management for key customers, and improve forward-looking risk capabilities [1]. In recent years, Xingtai Bank has required branches to assign special personnel to be responsible for key customers to improve the risk management level of existing customers [1].

Regional banks should base on the characteristics of the regional economy and take a differentiated development path. Xingtai Bank can learn from the following experiences:

: Xingtai City has cultivated 44 county-level characteristic industrial clusters, including national-level industrial clusters such as Qinghe cashmere, Pingxiang children’s strollers, Ningjin wires and cables, and Linxi bearings [2]. The six regional characteristic products launched by Xingtai Bank, including Cashmere Loan, Stroller Loan, Cable Loan, Bearing Loan, Pet Loan, and Auto Parts Loan, are reflections of this differentiated positioning [2].

: Xingtai Bank is promoting the “Retail + Green” strategy, realizing business-finance integration through the construction of an intelligent financial system [6]. Small and medium-sized banks should accelerate digital transformation, use financial technology to improve service efficiency and risk control capabilities, and reduce operating costs [4].

: Focus on small and micro enterprises and individual customers, deeply cultivate segmented markets, and avoid direct homogeneous competition with large banks [4].

For weak regional banks, merger and reorganization is an effective way to resolve risks.

include: the main sponsor absorbs and merges village banks; in 2025, village banks have become the absolute main force of integration, with 231 institutions [5]; regional banks merge into unified legal entities, such as Shanxi, Sichuan, Liaoning and other provinces actively promote the integration of city commercial banks into provincial-level legal entities [3]; rural credit cooperative reform, accelerate the reform and risk resolution of rural credit cooperatives by integrating their resources [3].

: Since the “14th Five-Year Plan” period, regulatory authorities have adhered to the principle of “one province, one policy” and promoted key regions to formulate personalized reform plans [5]. The Ningxia Financial Regulatory Bureau promoted Shizuishan Bank to achieve results through the reform path of “upgraded supervision + central-local coordination + shareholder empowerment” [5]. In 2025, a total of 394 bank institutions were approved for merger or dissolution, with Inner Mongolia leading the way by integrating 139 institutions at one time [5].

: For institutions that cannot continue to operate, promote market-oriented and rule-of-law-based market exit, and the Deposit Insurance Fund provides necessary risk disposal fund support [4].

To fundamentally prevent risks, it is necessary to improve the corporate governance structure.

: The largest shareholder of Xingtai Bank is Hebei Shunde Investment Group, which is 100% controlled by the Xingtai Municipal Government, belonging to a local state-controlled bank [2]. In recent years, local governments and local state-owned enterprises have increased their shareholding ratios through capital injection or equity transfer, which helps optimize the equity structure and improve the level of corporate governance [3].

: Establish a comprehensive risk management system covering credit risk, liquidity risk, and market risk [1]. Improve risk limit management and operating information reporting systems, and strengthen liquidity risk stress tests [1].

: Xingtai Bank received a million-yuan fine in 2025, exposing compliance loopholes [2]. It is necessary to strengthen internal control, standardize shareholder behavior, and strengthen the construction of compliance culture [4].

: Closely monitor changes in the core Tier 1 capital adequacy ratio to ensure it does not fall below regulatory requirements; strengthen communication with provincial and municipal governments to strive for special bond capital injection support; explore issuing perpetual bonds and Tier 2 capital bonds to replenish capital.

: Increase the write-off of non-performing loans; Xingtai Bank’s provision coverage ratio reached 205.96% in 2024, with certain write-off space [1]; connect with asset management companies to explore structured transaction models for non-performing asset disposal; strengthen post-loan management and implement ledger-based monitoring for key customers.

: Strengthen liquidity risk monitoring to ensure the liquidity ratio remains in a reasonable range; establish a three-level liquidity risk management model (head office, branch, sub-branch) and conduct regular stress tests [1].

: Continue to reduce the proportion of real estate loans to below the industry average; increase credit support for key industries such as manufacturing, wholesale and retail; develop characteristic businesses such as green finance and inclusive finance.

: Formulate a three-year capital replenishment plan, clarify the scale and timing of replenishment through each channel; actively introduce strategic investors to optimize the equity structure; strive for support from local government special bonds.

: Promote the construction of an intelligent financial system to realize deep integration of business and finance [6]; use big data and artificial intelligence technologies to optimize risk control models; improve the precise service capabilities for small and micro enterprises and individual customers.

: Closely monitor the integration dynamics of city commercial banks in Hebei Province, and evaluate the possibility of merger and reorganization with other institutions; if participating in the establishment of a provincial-level legal entity, enhance competitiveness through resource integration.

: Continue to deepen the financial service model for county-level industrial clusters and build a “small but excellent” regional bank brand; strengthen in-depth coordination with local governments and give play to the unique advantages of local banks in serving the local economy.

: Establish a long-term mechanism for coordinated development with the regional economy to achieve positive interaction with the local economy [1]; improve corporate governance, strengthen risk management, and enhance comprehensive competitiveness.

Xingtai Bank’s core Tier 1 capital adequacy ratio dropping to 8.66% and non-performing loan deviation rate reaching 120% reflect its pressure on capital replenishment and challenges in asset quality management. As a regional city commercial bank with total assets of less than 200 billion yuan, Xingtai Bank needs to find its position in fierce competition and resolve risks through diversified paths such as capital replenishment, non-performing asset disposal, business transformation, and merger and reorganization.

From the perspective of the entire industry, the risks of small and medium-sized banks have continued to converge, and the number of high-risk institutions has dropped by half from the peak, but some weak regional banks still face operating pressure. Risk resolution for regional banks must adhere to the principle of “adapting to local conditions” and adopt the strategy of “one bank, one policy”, comprehensively using measures such as capital replenishment, merger and reorganization, and market exit to promote differentiated and connotative development.

In the future, with the in-depth advancement of reform and risk resolution work during the “14th Five-Year Plan” period, small and medium-sized banks are expected to further “reduce quantity and improve quality”, enhance their risk resistance capabilities and the quality of services to the real economy, and provide strong financial support for the high-quality development of the regional economy.

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[1] Dagong Global Credit Rating Group. Credit Rating Report on 2025 Perpetual Capital Bonds of Xingtai Bank Co., Ltd. [R]. 2025.

[2] Chuangye Zuiqianxian. Xingtai Bank Welcomes Executive Reshuffle on Its 18th Anniversary; Million-Yuan Fine and Loan Concentration Become Hidden Worries [EB/OL]. 2025. http://mp.cnfol.com/57997/article/1767824003-142203059.html

[3] KPMG Advisory (China) Co., Ltd. Research on the Development of China’s Non-Performing Asset Industry (2025) [R]. 2025. https://assets.kpmg.com/content/dam/kpmg/cn/pdf/zh/2025/10/2025-research-on-the-development-of-china-s-non-performing-asset-industry.pdf

[4] Securities Times. Risks of Small and Medium-Sized Banks Continue to Converge; Differentiated Connotative Development Is Expected [EB/OL]. 2025-03-14. https://stcn.com/article/detail/1582978.html

[5] 21st Century Business Herald. In-Depth | Banking Industry “Downsizing” [EB/OL]. 2025-12-26. https://www.21jingji.com/article/20251226/herald/99d395d39cf41290b11bda331c43264f.html

[6] Yonyou Fintech Co., Ltd. Xingtai Bank Reshapes Bank Financial Management Mode with Intelligent Finance [EB/OL]. 2025-12-15. https://www.yonyoufintech.com/news/detail/id/1000.html

[7] Lianhe Credit Rating Co., Ltd. 2025 Industry Analysis of City Commercial Banks [R]. 2025. https://www.lhratings.com/file/fda56e6233c.pdf